The insurance sector has not been spared the seeming ubiquity of digital disruption across the economy, and “insurtech” is now a buzzword in many corners of the industry. There has been talk of “burning platforms” and the need for industry incumbents to embrace comprehensive digital change before they are burnt alive by new technologies.
That said, the truth is a bit more nuanced. Investec Life, although with a young legacy, is disrupting the status quo by providing technology-based solutions to clients, based on hearing what clients want and responding to their needs.
The term insurtech is sometimes used somewhat broadly. Insurtechs are often concerned with improving narrow, highly specialised parts of businesses that do not always result in better customer experience because of enhanced technology.
Some insurtechs are focussed on new ways of accessing consumers, some on new ways of assessing risk, or interacting with intermediaries. There are comparison platforms built on insurtechs, and new ways of paying claims. Some insurtechs – such as peer-to-peer insurance – do employ a new business model. But, the question remains what a more pervasive technical leap would do to the sector and what it would mean for clients. This is the part that matters, and this is what we need to challenge as we adopt technologies.
Insurance is about making a promise and upholding it
There is no doubt that times are indeed changing, but the essence of insurance remains unchanged. If something bad happens, a client wants the comfort of knowing that their insurance company will cover them. The relationship is based on client’s trust in their insurer. That should never be taken for granted.
No matter how innovative, no matter how catchy the brand name, a start-up will always struggle to convince potential clients to part with their insurance premiums without a reliable brand name to back it up. Innovative tech start-ups are interesting, but they bring with them a trust deficit that should not be underestimated. It is really the trust relationship, more than the functionality of a technology, that will convince prospective clients to change insurers.
Incumbents partnering with insurtechs are valuable
This does not lessen the need for the trusted established players to look to how technology meaningfully enhances the client experience and outcomes. There are opportunities for insurtechs and incumbents to form partnerships to leverage the innovation brand equity of the former and the reliability of the latter. But whatever form an insurtech takes, trust is the ultimate driver of the long-term insurance relationship.
In a modern insurance environment, the killer app is not complete digitisation, but rather an element of choice in supporting customer engagement. It’s understandable that clients appreciate being able to purchase insurance on their own terms. In the high-income and high net-worth market particularly, we appreciate that clients have more complex considerations that may require a mix of digital, online and personal interaction. We firmly believe and are committed to an “omni” (i.e. multi) channel approach that allows clients to personalise their own insurance experience and needs as they require in the time that they prefer.
Technology and innovation should be driven by client-centricity
Within the omni-channel environment, efficiencies can be driven by back-end insurtech innovations like revolutionary underwriting methods or the efficiencies created through elimination of paperwork. In such cases, technology enables an improved client experience, without unnecessarily disrupting the business model for the sake of disruption itself. Technology makes the process easy, understandable and efficient, with the client doing things on their own terms in partnership with the insurer. Technology in this case enhances the trust relationship, and does not detract from it.
For the omni-channel offering to work, it’s key that the client should have confidence in every one of the channels on offer. None should feel like an add-on. If the customer wants slick digital functionality, or personal service from specialist advisers, they should trust that they will be able to get it.
What is the future of trust in a modern insurance environment?
This is where balancing insurtech credibility with the trustworthiness of an established financial-services brand becomes important. What form that will take is what makes the modern insurance industry so exciting. It could be a legacy brand underwriting the products of a new entrant, an insurtech incubator at an existing insurer, or through acquisition of a start-up.
Insurance technology allows insurers to become extremely client focused, omni-channel and market friendly, by concentrating on providing client choice.
This might not mean an exclusively digital strategy, or turning your company into an insurtech overnight, but it will require the right levels of innovation.
There are almost no barriers to entry in today’s tech-enabled insurance industry. Be it start-ups using a cell-captive or reinsurance agreement with an incumbent, or a global consumer brand expanding into insurance, all can provide competition for the industry and more choice for the client.
Any company that doesn’t innovate, transform and provide client choice will surely go the way of the dinosaur.
By Michael Goemans, Investec Life CEO